If you want to create a startup that will be successful, and possibly change the world, this usually requires developing something that’s never been done before; innovation that goes from nothing to something. Peter Thiel discusses this concept in his book “Zero to One: Notes on Startups, or How to Build the Future.”
Thiel is well-known for being one of the founders of PayPal and the data analytics firm Palantir. You may also know him as the inspiration behind the character Peter Gregory in HBO’s series “Silicon Valley.” Thiel has regularly lectured at Stanford University to help budding entrepreneurs change the world. There are a few fundamental theories that he emphasizes in both his teaching and writing:
The greatest leaps in progress are vertical.
This means inventing something completely new or making a massive improvement to an existing product or service. Thiel writes, “If you build something valuable where there was nothing before, the increase in value is theoretically infinite. [For example] a drug to safely eliminate the need for sleep or a cure for baldness.”
Google wasn’t the first to offer users a search engine, but their PageRank algorithm was a game changer and gave them a massive leg up on their competition. In 2007, Apple’s iPhone impacted the phone industry like nothing before. “Today’s ‘best practices’ lead to dead ends; the best paths are new and untried,” states Thiel.
Most progress tends to be horizontal; going from one to n. This means copying something familiar and making incremental changes. Vertical progress is hard to imagine because it requires envisioning things that don’t yet exist. Thiel believes the future will be created by those asking questions no one else is thinking about, like: “Can people live on the moon? Is a world without cars possible? Will we be able to fully live off renewable energies?” Before Thiel hires someone or invests in their business, he says the most important question to ask is this: “What important truth do very few people agree with you on?”
Entrepreneurs should embrace monopolies.
If nothing else, Thiel likes controversial ideas. He contends, “Monopoly is the condition of every successful business” and “competition is for losers.” He isn’t against capitalism, but he believes every startup should strive to dominate and massively outperform their competition. He concedes that while monopolies can be abused by the greedy, monopoly shouldn’t inherently be considered a bad word. Instead, he says that “a monopoly simply means one company is doing something so much better than everyone else, that simply no one else can survive. This is actually good for everyone.”
He suggests that entrepreneurs should first work to build a “mini-monopoly” by capturing a small market; target a specific group of people where there’s little or no competition. Thiel states, “Lots of tech hits, like Facebook and PayPal, were launched in small communities of power users. These early adopters tested the product, identified early bugs, and helped to spread the word when the company expanded. An online yearbook for Harvard students might not strike you as a $100 billion idea. But today Facebook is a $200 billion company, because Zuckerberg established monopolistic fiefdoms at colleges before expanding to take over the world.”
It all comes down to the founders having a vision.
Every innovative company started with one or more founders who had a clear idea of what their company could be and never lost sight of their goals. Despite setbacks and naysayers, visionaries keep the faith and persist. According to Thiel, about 90 percent of visionaries are also “weirdos.”
In Elon Musk’s biography by Ashlee Vance, the first thing Musk asks Vance when they meet is “Do you think I’m insane?” Thiel states, “Any founder or inventor doing something new must wonder: am I sane? Or am I crazy? “ But if Musk thought like everyone else, it’s unlikely that SpaceX and Tesla would exist today. Musk recounts getting resistance on the simplest of things, like putting a touchscreen in his cars: “When we first talked about the touch-screen, the guys came back and said, ‘There’s nothing like that in the automotive supply chain.’ I said, ‘I know. That’s because it’s never been put in a car before.’”
Thiel uses Mark Zuckerberg as another example of someone who saw his own role in creating the future. He writes, “When Yahoo! offered to buy Facebook for $1 billion in July 2006, I thought we should at least consider it. But Mark Zuckerberg walked into the board meeting and announced: ‘Okay, guys, this is just a formality, it shouldn’t take more than 10 minutes. We’re obviously not going to sell here.’ Mark saw where he could take the company, and Yahoo! didn’t.”
Ultimately, Thiel is an optimist who believes that the best inventions have yet to be thought up. And they won’t be invented by people trying to copy Elon Musk or Steve Jobs. The future will be created by innovators looking in unexpected places, asking questions no one else is asking.
Melissa Brown is a web developer at SimpleDzn.com and former business professor at the University of Alaska. She can be reached at firstname.lastname@example.org. This column is brought to you as a public service by the UAF Department of Applied Business.